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Yields on T-bills, bonds may rise on steady rates

yields on t bills bonds may rise on steady rates - Yields on T-bills, bonds may rise on steady rates

RATES OF THE government securities on offer this week will likely inch up as investors seek higher yields amid expectations that the central bank will keep its policy setting steady for the rest of the year.

The Bureau of the Treasury (BTr) is set to borrow P20 billion on Monday via Treasury bills (T-bills). Broken down, it will borrow P5 billion each via the 91-day and 182-day papers and P10 billion via the 346-day instruments.

On Tuesday, it will auction off P30 billion worth of reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and nine months.

A trader said the rate of the 91-day T-bills may remain unchanged while yields on the longer tenors may rise by five to 10 basis points (bps) this week as investors are still liquid and prefer short-term securities amid expectations of steady policy rates from the Bangko Sentral ng Pilipinas (BSP).

“There are growing expectations that the BSP will likely keep its policy rates steady for the rest of the year. Investors trim positions at the long end of the curve in the past few weeks and may again opt to place their money on short-term offerings of the BSP and the BTr given the consistently robust subscriptions,” the trader said in an e-mail.

The BSP last month kept benchmark interest rates unchanged amid a benign inflation outlook and signs of economic recovery.

The policy-setting Monetary Board, at its fourth policy meeting for the year, kept the rates on the BSP’s overnight reverse repurchase, lending and deposit facilities at their record lows of 2.25%, 2.75% and 1.75%, respectively.

Inflation eased to a three-month low of 2.4% in August, slower than 2.7% in July 2020, but faster than the 1.7% in August 2019.

This brought the year-to-date average to 2.5%, within the BSP’s 2-4% target band and slower than the 2.6% forecast for 2020.

A second trader said T-bill rates will likely increase by a minimum of five basis points as the market remains awash with cash.

Meanwhile, for the 10-year T-bonds, the first trader said its rate will likely range from 3.125-3.375% as there is preference for short-term securities.

“In the past few weeks, the local bond yield curve showed a steepening bias with investors opting to park their excess liquidity at the immediate part of the curve, while trimming positions at the longer end of the curve,” the trader said.

At the secondary market on Friday, rates of the three-month, six-month and one-year T-bills stood at 1.21%, 1.525% and 1.832%, respectively, while the 10-year bonds fetched a yield of 2.996%.

The Treasury last week partially awarded its offer of T-bills, borrowing just P12 billion out of the programmed P22 billion even as the offer was more than twice oversubscribed, with bids reaching P54.152 billion.

Broken down, the BTr awarded P7 billion as planned via the 91-day T-bills at an average rate of 1.15%, lower than 1.167% in the previous auction.

The government also borrowed P5 billion as programmed via the 182-day tenor at an average rate of 1.589%, higher than the 1.518% yield previously.

Meanwhile, it rejected all bids for the 364-day T-bills even as tenders reached P14.705 billion, well above its P10-billion program. Had the government made a full award, the average rate for the one-year papers would have climbed to 1.969%, up from 1.807% previously.

On the other hand, the Treasury made a full P30-billion award of its offer of  reissued 10-year T-bonds on Aug. 12 at an average rate of 2.724%.

The Treasury is looking to raise P160 billion from the domestic market this month: P100 billion via weekly auctions of T-bills and P60 billion via T-bonds to be offered fortnightly.

The government is looking to borrow around P3 trillion this year from local and foreign lenders to help fund its budget deficit expected to hit 9.6% of the country’s gross domestic product. — K.K.T. Jose

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